Posts filed under “Markets”

Interesting discussion of hedge funds and housing by Tom Abate at the San Francisco Chronicle. After what’s come to be the usual discussion of bubble, Abate takes the extra step of delineating asset bubble theory:

– The low worldwide interest rates of the past few years could have encouraged speculation in certain categories of assets similar to the stock market bubble of the late 1990s.

– Such easy money has flowed especially into housing, as buyers took advantage of low rates, and into hedge funds, lightly regulated investment pools for institutions and the rich.

– If housing prices or hedge funds went bust, consumers could retrench and major financial institutions could be endangered, damaging the global economy.

– The possibility of bubblelike conditions means that the Federal Reserve and other central banks can’t raise interest rates too fast as they battle inflation for fear of triggering such a crash.

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About Barry Ritholtz

Ritholtz has been observing capital markets with a critical eye for 20 years. With a background in math & sciences and a law school degree, he is not your typical Wall St. persona. He left Law for Finance, working as a trader, researcher and strategist before graduating to asset managementRead More...

Quote of the Day

"The largest Asian central banks have gone on record that they are curbing their purchases of US debt. And they are also diversifying their huge reserves, steadily moving away from the dollar. The risks have simply become too many and too serious." -W. Joseph StroupeEditor, Global Events

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